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Texas Tax Shakeup Lets Businesses Slice Franchise Bills With Turbo Write-Offs
From Hoodline.com
Texas Tax Shakeup Lets Businesses Slice Franchise Bills With Turbo Write-Offs
By Ryan Anderson
Texas companies are about to get a lot more aggressive on write-offs. Starting with the 2026 franchise-tax report, businesses will be able to expense many purchases much faster and trim their franchise-taxable margins after the state moved to align its rules with the federal One Big Beautiful Bill. The shift lets companies take larger first-year depreciation deductions – in many cases a full 100% write-off – for equipment, computers, and similar property, a change that could reshape bookkeeping and tax planning for asset-heavy firms across Texas.
Acting Texas Comptroller Kelly Hancock rolled out the policy shift in a Dec. 1 notice, saying the office will conform franchise-tax depreciation rules to the federal bonus-depreciation provisions and allow businesses to elect the federal treatment beginning with the 2026 franchise-tax report, according to the Texas Comptroller. The agency said a legal review concluded that Texas law already permits using the Internal Revenue Code in effect for the corresponding federal tax year instead of remaining locked to the 2007 IRC. Hancock framed the decision as a way to deliver upfront relief while sparing businesses from maintaining two separate depreciation schedules.
According to the Houston Business Journal, qualifying property under the revamped Texas approach generally includes most tangible personal property with a recovery period of 20 years or less. That list covers items such as computers and technology hardware, machinery and equipment, furniture and furnishings, and certain software. The outlet also notes that some new manufacturing or production facilities can qualify, so a broad range of capital investments could see first-year relief.
How It Changes Franchise-Tax Math
The Comptroller’s guidance allows federal bonus depreciation to be included in a taxable entity’s cost-of-goods-sold deduction, which lowers the taxable margin used to compute the franchise tax, according to analysis from EY. Tax advisors say the practical effect is bigger first-year deductions and simpler record-keeping, since companies can generally lean on their federal depreciation calculations for Texas franchise-tax purposes instead of juggling separate state schedules.
Who Benefits – And When
The federal One Big Beautiful Bill restored permanent 100% additional first-year depreciation for eligible property acquired and placed in service after Jan. 19, 2025, according to the IRS, so many 2025 purchases will be squarely in play for upcoming Texas reports. That timing means businesses that put qualifying equipment into service in 2025 may see franchise-tax benefits on the 2026 report, while purchases placed in service before that date generally will not qualify for the new federal treatment.
The Comptroller also built in an equity-aimed remedy. On the 2026 report, a taxpayer can calculate a one-time “net depreciation adjustment” for each qualifying asset to reconcile prior differences between federal and Texas depreciation. Advisors say that calculation could open the door to refund claims or amended filings in some situations, as highlighted in tax-firm analyses, including Grant Thornton. Grant Thornton notes that taxpayers should review asset dispositions and timing carefully, since the adjustment cannot reduce a taxable entity’s margin below zero and may interact with other deductions. In practice, that means businesses with long-lived equipment or prior dispositions will want their tax teams fully engaged before they lock in 2026 franchise-tax numbers.
Business owners who made capital purchases in 2025 or early 2026 are being urged to flag those assets now and consult their CPA or tax counsel to decide whether to elect federal treatment or use the one-time adjustment. The Comptroller’s website already carries the 2026 franchise-tax forms and guidance for filers. For more detailed planning, firms are being advised to model both options – electing bonus depreciation on the federal return versus relying on the equitable adjustment on the Texas report – since the better play depends on each company’s revenue mix, cost of goods sold, and past dispositions.
Bottom line, the change is immediate and meaningful for many Texas businesses: bigger upfront write-offs paired with simpler reporting. The actual payoff, though, will turn on timing, asset types, and how carefully companies coordinate with their tax advisers. Expect accountants and in-house controllers across the state to be re-running 2025 numbers over the next few weeks as filings for the 2026 franchise-tax report creep closer.
